Verizon to buy Yahoo for $4.83 billion, merge it with AOL

Verizon Communications Inc. has agreed to pay $4.8 billion to acquire Yahoo Inc. and is likely to make the announcement before the start of trading in the U.S. today (July 25), according to a person familiar with the matter. While the deal is being looked upon as a steep price to pay for a company that’s primary internet business is considered “worthless” by Wall Street, on the other hand, the deal is expected to expand Verizon’s advertising business which in turn would help it increase growth.

The deal would include Yahoo real estate assets, and online assets including search, mail and instant messaging, along with its ad technology. However, intellectual property assets are expected to be sold separately, according to Bloomberg. The purchase could hand Verizon the popular sites Tumblr and Flickr.

Verizon, which is one of the largest US carriers, is facing market saturation and limited growth prospects in its traditional business. With its purchase of Yahoo, that follows its acquisition of AOL in May 2015, the company is hoping to become a player in the fiercely contested advertising space.

Verizon faces two dominant competitors in the online advertising business: Google and Facebook. The company might be able to mount a credible challenge to those two giants by meshing together various tools from AOL, Yahoo, and its own operations.

In a $4.4 billion deal last year, Verizon bought AOL – another faded internet star – which gave it ownership of the Huffington Post, Techcrunch, Engadget and other news sites.

With Verizon already having AOL’s advertising technology and now with Yahoo’s advertising and competence in native advertising, it could prove useful for it particularly in the mobile space. Yahoo could also help Verizon improve in the search field, where it is currently lagging behind. Also, Yahoo is expected to bring in hundreds of millions more viewers from sites like News, Sports, and Finance.

However, Verizon still has a long way to go to catch up with the online advertising leaders, despite having AOL and Yahoo assets. Currently, Verizon with AOL holds a mere 1.8% of the $69 billion digital ad market in the U.S. Further, while Yahoo has about 3.4%, Google and Facebook together claim about half of it.

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